International Portfolio Holdings and Swiss Franc Asset Returns
This paper revisits the puzzle of low returns on Swiss Franc assets using a new data set of portfolio holdings of residents and non residents at Swiss banks. The main findings are as follows. First, we find that the return anomaly is present only for fixed income assets and not for equity. Second, it is mostly due to a long run deviation from uncovered interest rate parity, not a deviation from purchasing power parity. Third, it is unlikely that foreign demand for Swiss assets (possibly due to banking secrecy) is driving down returns: This demand is quantitatively small especially for Swiss Franc fixed income instruments. A dynamic factor analysis confirms that foreign demand had almost no impact on Swiss Franc asset prices. Finally, we propose a new explanation for low returns on Swiss fixed income assets, namely the diversification benefits offered by these instruments. Applying reversed portfolio optimization to back out the implied returns reveals that the estimated pattern of this returns conforms very well with the observed pattern.
(This abstract was borrowed from another version of this item.)
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://wwz.unibas.ch
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Frederic S. Mishkin, 1982.
"Are Real Interest Rates Equal Across Countries? An Empirical Investigation of International Parity Conditions,"
NBER Working Papers
1048, National Bureau of Economic Research, Inc.
- Mishkin, Frederic S, 1984. " Are Real Interest Rates Equal across Countries? An Empirical Investigation of International Parity Conditions," Journal of Finance, American Finance Association, vol. 39(5), pages 1345-57, December.
- Peter KUGLER & Klaus NEUSSER, 1990.
"International Real Interest Rate Equalization: A Multivariate Time Series Approach,"
Vienna Economics Papers
vie9003, University of Vienna, Department of Economics.
- Kugler, Peter & Neusser, K, 1993. "International Real Interest Rate Equalization: A Multivariate Time-Series Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(2), pages 163-74, April-Jun.
- Modjtahedi, Bagher, 1988. "Dynamics of real interest differentials : An empirical investigation," European Economic Review, Elsevier, vol. 32(6), pages 1191-1211, July.
- Fountas, Stilianos & Wu, Jyh-lin, 1999.
"Testing for Real Interest Rate Convergence in European Countries,"
Scottish Journal of Political Economy,
Scottish Economic Society, vol. 46(2), pages 158-74, May.
- Stilianos Fountas & Jyh-lin Wu, 1998. "Testing for Real Interest Rate Convergence in European Countries," Working Papers 24, National University of Ireland Galway, Department of Economics, revised 1998.
- Gary Chamberlain & Michael Rothschild, 1982.
"Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets,"
NBER Working Papers
0996, National Bureau of Economic Research, Inc.
- Chamberlain, Gary & Rothschild, Michael, 1983. "Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets," Econometrica, Econometric Society, vol. 51(5), pages 1281-304, September.
- Chamberlain, Gary & Rothschild, Michael, 1982. "Arbitrage, Factor Structure, and Mean-Variance Analysis on Large Asset Markets," Scholarly Articles 3230355, Harvard University Department of Economics.
- Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
- Christian Dreger & Christian Schumacher, 2003. "Are Real Interest Rates Cointegrated? Further evidence based on paneleconometric methods," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 139(I), pages 41-53, March.
- Mario Forni & Marc Hallin & Lucrezia Reichlin & Marco Lippi, 2000.
"The generalised dynamic factor model: identification and estimation,"
ULB Institutional Repository
2013/10143, ULB -- Universite Libre de Bruxelles.
- Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2000. "The Generalized Dynamic-Factor Model: Identification And Estimation," The Review of Economics and Statistics, MIT Press, vol. 82(4), pages 540-554, November.
- Forni, Mario & Hallin, Marc & Lippi, Marco & Reichlin, Lucrezia, 1999. "The Generalized Dynamic Factor Model: Identification and Estimation," CEPR Discussion Papers 2338, C.E.P.R. Discussion Papers.
- Dutton, Marilyn Miller, 1993. "Real interest rate parity new measures and tests," Journal of International Money and Finance, Elsevier, vol. 12(1), pages 62-77, February.
When requesting a correction, please mention this item's handle: RePEc:bsl:wpaper:2004/08. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WWZ)
If references are entirely missing, you can add them using this form.